This will appear as an ordinary adventurer's oil lantern. When tested, it will work just like a normal one. It will not radiate magic at all, unless extensive tests are conducted upon it, at which time, it will also reveal its cursed status. When used in non-threatening circumstances, this lantern will function normally, using a wick, and oil. It will throw off a standard amount of light.
As soon as the owner (or the party, as a whole) is attacked by an enemy or monster, the lantern will cast a complete Darkness spell, bringing inky blackness to an area 50 feet in diameter. The effect will continue so long as danger is present (that is, so long as the enemies or monsters are still attacking). When the fight is over, however it turns out, the Darkness spell lifts, and the lantern is still burning normally, just like before.
It may not be immediately apparent that this item was the cause; creatures caught within the Darkness will have no idea, necessarily, where it came from. Testing the lantern at this point will still reveal nothing, of course, and neither will ordinary detection of magic or curses. It may take some time before the owner or group figures out what is causing the Darkness. The lantern may be discarded or destroyed at any time, without adverse effect.